Venture-capital investing sunk to lows not seen since 2005 in the fourth quarter with information-technology startups hit particularly hard.
According to report by Dow Jones VentureSource, funding for information-technology companies posted its weakest quarter since 1998, with just $2.2 billion invested – a 39 percent decline from the final quarter of 2007.
Investing falls to 2005 levels
The data confirm the widely held belief that venture capitalists have been consumed with their existing portfolios, weeding out companies they no longer want to support and setting aside money for the ones they hope can survive a prolonged downturn.
“Many venture capital firms are circling the wagons to weather the downturn,” said Jessica Canning, director of global research at VentureSource.
For the quarter, VCs put $5.5 billion into 554 deals, a total that fell 30 percent from a year ago. Within the information-technology industry, investments in software startups plummeted 54 percent, spending on electronics and computer hardware companies toppled 67 percent and money handed to Web-centric companies fell 31 percent.
Investments in healthcare businesses, including biotech startups, dropped 42 percent. Biopharmaceutical funding slumped to its lowest level since 2003.
The one bright spot was energy and alternative-energy investments, which were up 140 percent in the quarter.
Showing venture capitalist’s interest in their existing companies, 55 percent of quarterly money went into later-stage deals, compared with 50 percent last year. First-time funding for startups dropped to 18 percent of the total, down from 22 percent a year ago.
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